“MAKE SOME GOOD MISTAKES, THEN CORRECT THEM”

In our culture, the idea that making a mistake is really no big deal is still a bit of an alien concept. However, it is often just one of the paths we need to take on our journey to success, according to British economist Tim Harford. But what can we learn from our mistakes?

Tim Harford, author of worldwide bestseller The Undercover Economist, is one of the United Kingdom’s most popular economists and columnists. In one of his books, Harford covers the topic of ‘productive failure’. He is convinced that the solutions to the challenges we face in our increasingly complex world are not usually the result of inspiration or brilliant ideas, but that it is more a process of adjustment. We need to accept that this process inevitably involves trial, error and modification.

What is the role of the manager here?

TIM HARFORD: “The role of the manager is to allow a certain degree of experimentation, and to steer this in the right direction. There are endless possibilities when it comes to experimentation, and of course endless potential for mistakes. That is why managers need to give direction to the process.”

So the idea of the deus ex machina – for example, Steve Jobs having one amazing brainwave which led to the creation of the iMac or the iPhone – is a bit of a myth?

HARFORD: “In my opinion, it certainly is. Steve Jobs was undoubtedly a genius, but he didn’t create the iPhone out of thin air. The touch screen was the invention of the Royal Radar Establishment, a British government institution. Many of the algorithms were written by US army mathematicians. Chips, the GPS, and WIFI were not invented by Steve Jobs. He took advantage of all the experiments which had already been carried out. What he did do was to bring everything together into one device, which is by no means a simple thing to achieve. What Steve Jobs accomplished was extremely impressive.”

It’s not always clear when we are going wrong.

HARFORD: “This is a crucial point. For this reason, we need to pay closer attention to processes which can help us to recognise mistakes and correct them fast”.

So how do we recognise them?

HARFORD: “There are two ways to approach this. The first is to collect as much information as possible. For example, I might not know what kind of design would be best for my website. In this case, I could produce various websites and wait to see which design is the most successful. The second approach is more informal, and involves simply asking people for feedback about my website. The problem with this approach is that we don’t usually wait for the feedback, and the feedback we get needs to be constructive. Three years ago I gave a talk on innovation. After the talk, people came up to me and said things like ‘congratulations, excellent, very good’, but that wasn’t really helpful. Then Ted, the event organiser, came up to me and said ‘At one point you were talking about the Spitfire, a British fighter plane. But not everybody knows what a Spitfire looks like. Perhaps next time you could show a photo?’. That’s what I call perfect feedback. We should always be asking ourselves how we can improve.”

In large companies, it can sometimes be difficult to ensure the feedback reaches the right people. A good example of this was diesel-gate and the resulting scandal for VW.

HARFORD: “That’s right. There are many advantages to large companies. They have access to more means for lobbying and they can achieve economies of scale. They can also afford more trial and error without the risk of the business going under. But big companies also have a huge disadvantage. The feedback they receive is often very poor, and many big businesses find they are forced to scale down in order to survive. Some businesses which have had to take this path are Anaconda (the largest mining company around the beginning of the 20th Century), J&P Coats (a textile giant) and International Harvester (a manufacturer of building and agricultural machinery and trucks).”

FOUR OBSTACLES ON THE PATH TO SUCCESS

According to Tim Harford, these are the four obstacles you are likely to encounter along the road from failure to success.

Social pressure. If everyone seems to be going in one direction, it can be hard to take a different path. This is often the case in meetings. If everyone present comes up with the same unsatisfactory solution for a problem, somebody who has a better solution may not dare to suggest it. “If somebody has a new, innovative suggestion, they need to be prepared to go against the flow”, says Tim Harford. For that reason, it is essential to encourage a variety of opinions and ideas within a group. “Following a couple of serious problems, President Kennedy decided to split his advisors into two groups to discuss important issues, with each group campaigning for a different solution.” Discussion and opposing opinions are essential in order to find good solutions.

Lack of constructive feedback. It’s one thing to have a great idea, and to act upon it. But we also need to have a way of checking whether or not the idea is really working.

Mistakes which cost a lot of time and money. In 1959, industrialist Henry Kremer offered a reward to anyone who could manage to make a plane fly on human power alone. The plane had to be able to fly a figure of eight at a distance of three quarters of a kilometre. Many attempts were made and failed. It wasn’t until 1977 that engineer Paul MacCready managed to succeed. But how did he do it? “He took a different approach”, explains Tim Harford. Everyone else was building elaborate prototypes. Each time they crashed there were many months of repair work needed. Paul MacCready built a modular plane which was quick to repair. This way he could make many attempts whilst keeping expenses down, and that’s what won him the prize.

Our own pride. Nobody wants to fail, and when we are confronted with failure or loss we have a tendency to stubbornly stick to our guns. This kind of behaviour is also common amongst investors. If they have bought a share which then decreases in value, they will often go out and buy more of the same shares. They convince themselves that they will make up for their loss when the share price rises again.

You recommend a step-by-step approach in order to test ideas out whilst at the same time making the necessary adjustments. Is this always the right approach?

HARFORD: “Sometimes we really need radical innovation. Keith Jarrett and his concert in Cologne is a great example of this (see Keith Jarrett’s Concert ‘Failure’ box). Sometimes you need to take a completely different approach. When Apple first put the iPhone on the market, it was revolutionary. But after its release, it was necessary to adopt the step-by-step approach. A range of apps was developed for the phones, some of which were more successful than others.

“Long-term planning and governmental support are essential to encouraging advancement. I’m all for government-financed innovation prizes. They are a great way for the government to encourage private organisations to compete with each other and to find solutions to social problems. Napoleon, for example, offered a prize to anyone who could find a solution to the problem of keeping food fresh. The prize was won by Nicolas Appert, who discovered the method of pickling food and opened the world’s first ever pickling factory. You need to have the stimuli in place. For example, right now we desperately need to carry out some tests to find a way of limiting our CO2 emissions in order to fight climate change. However, since there is currently no such thing as a ‘CO2 prize’, we are seeing far less innovation in this area than we need.”

We can’t always glorify our mistakes. Look at the financial sector, for example, where a few bad ideas led to an enormous disaster.

HARFORD: “That’s right. Ultimately, you might have tried something new, but this can sometimes lead to extremely expensive mistakes. An example of this is ‘credit default swaps’, financial contracts which can be used to insure against risks – even risks which are not your own. These contracts made it possible to speculate on the bankruptcy of a business or a country. The amount of money which was poured into these financial derivatives increased by tens of billions of dollars in a very short time. I don’t believe that the financial sector makes more mistakes than other sectors, but when they do make mistakes, the consequences can run to enormous sums of money.”

What can the government do to facilitate this gradual learning, adaptation and innovation process?

HARFORD: “What is the best way to build a platform for new businesses to bloom and for new ideas to flourish? That is the first question we need to ask. We are familiar with the basic principles: good education, excellent infrastructure and regulation which is both understandable and practical.”

If you had one piece of advice for young entrepreneurs, what would it be?

HARFORD: “Be prepared to make mistakes, but try to make sure your mistakes are not too expensive and that you can correct them fast. You can limit costs by looking carefully at the design of your experiments. The quicker you can interpret the results of your experiments, the quicker you can make use of that information. The British government brought in a team of specialised behavioural analysts to advise them on the most effective way to collect taxes. The team tried out various techniques for short periods of time and were quickly able to produce the results of their findings. It goes without saying that entrepreneurs are full of ideas. If they can make some ‘good’ mistakes at the beginning and then go on to do an excellent job of correcting these mistakes, they will be able to achieve much more.”

KEITH JARRETT’S CONCERT ‘FAILURE’

Economist Tim Harford often uses the anecdote of pianist Keith Jarrett to show how, often, great things are born out of mistakes and chaos. And Tim Harford is by no means the only person who believes this.

January 1975. Vera Brandes, a 17 year-old German woman, persuades Keith Jarrett to give a concert in the Opera House in Cologne. A few hours before the concert, the famous jazz pianist is having a look around the stage when he spots a problem. The Opera has set up the wrong piano; the instrument is out of tune and too small, the felt is worn out and the pedals do not work. “I’m not performing unless you give me a better piano”, announces Keith Jarrett.

Vera Brandes is desperate. She knows it will be impossible to find another piano at such short notice. However, she does manage to get hold of a piano tuner. She approaches Keith Jarrett, who is waiting outside in a taxi. She spends some time standing in the rain, trying to persuade him. Eventually the pianist gives in.

Today, The Köln Concert is Keith Jarrett’s bestselling album and a milestone in jazz history. On that night, the pianist was forced to re-invent his style of playing. As the piano was not up to scratch, he had to avoid using the higher notes. Because the felt was so worn out, he had to really hammer the keys, sometimes even having to stand up in order to make the music audible to those in the back rows. The result of this was an enchanting, unique, energetic yet soothing melody.